Category Archives: criminal tax law

According to Law360, the Senate Foreign Relations Committee approved a bilateral tax treaty between the U.S. and Chile on Thursday after Sen. Rand Paul failed to amend the agreement with extra privacy safeguards.

The panel approved the treaty 20-1, with Paul, R-Ky., as the lone vote in opposition. Paul's amendment that failed would have included language adding more requirements the U.S. would have to meet to collect the bank records of American citizens in Chile.

The amendment would have required the U.S. to state how the bank records it seeks are relevant to an investigation of the tax treaty provisions or suspected noncompliance with domestic tax laws covered by the agreement, according to the amendment's text.

In opening remarks, the panel's chair, Sen. Bob Menendez, D-N.J., said ratification of the U.S.-Chile tax treaty was necessary to keep American taxpayers on equal footing with Chinese enterprises, which benefit from a recent treaty between China and Chile.

The China-Chile treaty puts Chinese enterprises "at a competitive advantage in terms of investments and engagement in the economic market in Chile," Menendez told reporters following the meeting. "Today, we move closer to leveling the playing field and giving the American companies the same opportunity."

 

The U.S. Chamber of Commerce had urged the committee to approve the bilateral treaty and told the Senate the delay in its ratification could slow the transition away from fossil fuels.

The Chamber said in a letter dated Wednesday,  May 31, 2023 that the treaty's ratification has become an "urgent priority" for U.S. companies with a presence in Chile. Without ratification, U.S. companies face an aggregate effective tax rate of up to 44.45%, whereas companies headquartered in countries with a tax treaty in effect with Chile "benefit from much lower rates," according to the Chamber's letter.

The treaty includes two changes needed to comply with provisions under the 2017 Tax Cuts and Jobs Act, a senior U.S. Treasury Department official said in October. 

The changes, referred to as reservations, were in response to two items in the TCJA: the base erosion and anti-abuse tax, which limits deductions on payments by a U.S. company to related parties abroad, and the overhaul's provision regarding the distribution of certain foreign dividends.

Most outstanding treaties have been held up by Paul since he joined the Senate in 2011, due to his concerns about privacy safeguards. The Senate in 2019 ended a yearslong impasse on several tax accords, but the treaty with Chile wasn't among them.

The National Foreign Trade Council applauded the panel's approval of the U.S.-Chile tax treaty in a statement and urged the full Senate to consider it quickly.

"The U.S.-Chile tax treaty will offer U.S. companies operating in Chile long-sought certainty that will allow them to fairly compete in a country with enormous potential in Latin America, a region where the U.S. currently only has two other treaties," said Anne Gordon, the business group's vice president for international tax policy.

Read more at: Tax Times blog

On January 18, 2023 we posted TIGTA Says That IRS' $80 Billion Funding Boost Spending Plan Is On Track, where we discussed that on August 16, 2022 we posted Inflation Reduction Act of 2022 Is Law, where we discussed what's in the Inflation Reduction Act allocates $80 billion to increase enforcement by the IRS and that the Internal Revenue Service is on track to deliver the spending plan for the Inflation Reduction Act's nearly $80 billion funding boost to the Treasury Department by the Feb. 17, 2023 deadline.

On April 6, 2023 we also posted IRS To Audit Wealthy Individuals and Large Corps  & Partnerships With $45.6 Billion Provided by The Inflation Reduction Act where we discussed that the Internal Revenue Service unveiled on April 6, 2023, its Strategic Operating Plan, an ambitious effort to transform the tax agency and the 150-page report to the Secretary of the Treasury outlines the agency’s historic plans to make fundamental changes following funding from last year’s Inflation Reduction Act. 

The plan makes clear that the resources to be deployed over the short and long term will be used to accomplish various objectives including:

• Adding capacity to unpack the complex filings of high-income taxpayers, large corporations and complex partnerships and

• Addressing a growing chasm between the number of experienced compliance personnel at the IRS who audit high-income, high-wealth tax filings for compliance (about 2,600 employees) and the roughly 30,000 individuals making more than $10 million a year, 60,000 large corporations and 300,000 large partnerships and S corps.

The spending plan calls for hiring and onboarding the first groups of compliance specialists to focus on large corporations and partnerships and high-income individuals in the 2023 fiscal year. Under the plan, the agency would start using new compliance tactics for the wealthy and large corporations in the 2025 fiscal year.

Now All of Those Aspirational Objectives to Guarantee
Fairness in The Tax System Are ALL GONE
as a Result of the Debt Limit Bill!

According to Law360, the $20 billion in IRS funding cuts included in the debt limit deal reached by President Joe Biden and House Speaker Kevin McCarthy would be part of the largest-ever rescission of previously authorized funding, the chair of the House tax panel said Tuesday, May 30, 2023 in urging colleagues to support the bill.

House Ways and Means Committee Chair Jason Smith, R-Mo., said the agreement to trim roughly $21.4 billion of the $80 billion funding boost the Internal Revenue Service received under the Inflation Reduction Act marks a compromise between Democrats and Republicans. (What compromise? What did the Democrats get in return?) In addition to extending the federal debt limit for about 19 months, he said the deal "downsizes the outrageous pay raise the IRS was given under one-party Democrat rule."

Immediately rescinding nearly $1.4 billion in unspent IRS funding for fiscal 2023 would be a significant victory because it would limit the number of agents the IRS could hire, Smith said at the hearing.

The 99-page bill, unveiled Sunday after weeks of negotiations between congressional leaders and the White House, would extend the $31.4 trillion federal debt ceiling until Jan. 1, 2025. The bill would not make changes to the energy tax incentives passed as part of the Inflation Reduction Act, as in the debt limit bill passed by the House last month.

Rep. Mike Thompson, D-Calif., said at the hearing that the amount of funding clawed back from the IRS would be significant.

The White House on Tuesday urged Congress to send the debt limit bill to Biden's desk, saying that it reflects a bipartisan compromise to avoid the U.S.' first-ever default. aka Biden Caved To Extortion!

The Biden administration downplayed the rescission of the IRS funding, with a White House source saying Sunday that the IRS would be able to continue to make use of the remaining $60 billion it received under the Inflation Reduction Act over "the next several years." B_ _ _ S_ _ _!

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Read more at: Tax Times blog

According to Law360, a Swiss-born banker who challenged an $8.7 million tax bill stemming from a $6 million gift he made to his mother before he became a U.S. citizen properly disclosed the gift on an amended return, the U.S. Tax Court determined Monday.

In siding with Ronald Schlapfer, who claimed he didn't owe gift tax because he wasn't planning to live in the U.S. at the time he gave the gift, the court barred the Internal Revenue Service from trying to collect, saying the agency had run out of time.

The government has three years to collect gift tax from the time a return is filed, as long as the return adequately discloses the gift, the court said. Schlapfer filed his amended gift tax return, along with a protective claim and explanation why he believed he didn't owe gift tax, in 2013 as part of his disclosure package for participation in the IRS' Offshore Voluntary Disclosure Program. Even with a year's worth of extensions, the IRS had run out of time to assess the gift tax by the time it issued the notice of deficiency — which included $4.4 million in gift tax liabilities and $4.3 million in additions to tax — in 2019, the court said.

While the IRS said Schlapfer did not adequately disclose the gift on his amended return, the court said other documents in Schlapfer's disclosure package, namely the offshore entity statement that explained the source of the gift, could be relied on to prove adequate disclosure under Treasury regulations.

Schlapfer, who became a U.S. citizen in 2008 and lived in Florida when he challenged the tax bill, worked for Citibank before starting European Marketing Group Inc. in of Panama in 2002, according to the decision. The gift to his mother was a life insurance policy that included his aunt and uncle and was funded partly with EMG stock.

Read more at: Tax Times blog

According to Law360, Federal prosecutors asked a Philadelphia judge to give the father-son duo who owned the iconic Tony Luke's cheesesteak restaurant more than two years in prison each and order them to pay $1.3 million in combined restitution after they pled guilty to defrauding the government through an $8 million tax evasion scheme.

On May 19, 2023, U.S. District Judge Gerald A. McHugh received the government's sentencing submission for Tony Luke's founder Anthony Lucidonio Sr., 84, and his son, Nicholas Lucidonio, 57, about a year after they pled guilty to the first count of the 24-count indictment that initially charged them in 2020.

"Defendants' willingness to baldly deny the full scope of their criminal conduct, and defendant Nicholas Lucidonio's brazen willingness to speciously contest his role in the criminal scheme to evade both income and payroll taxes is astounding," the memorandum reads.

Prosecutors accused the Lucidonios of various crimes related to the business' payroll and income taxes. I

"Despite committing tax evasion for the better part of two decades, and despite their own accounting records which show skimmed sales approximating $8 million, concealed net profits in the millions, and a tax loss of at least $1.3 million, defendants would have this court believe the harm they caused to the United States Treasury for which they are responsible is just $286,000 over the decade charged in the indictment," the memorandum reads.

In total, the government determined Tony Luke's failed to pay $486,142 of payroll taxes and $834,900 of income taxes while the Lucidonios argue it was just $286,000 in payroll taxes and $424,535 in income taxes that was lost.

The memo also says the sentencing guidelines suggest 30-37 months for Nicolas Lucidonio and 37-46 months for Anthony Lucidonio if they accept responsibility for their crimes.

Read more at: Tax Times blog